The Union Budget 2012-2013 - As I See It!
So the Union Budget has come and leaving aside the initial hoopla and panic both, it is time to put this document under closer scrutiny. As it covers a broad spectrum of issues of national, it would be more appropriate in this article to study the implications of some of the Finance Minister's tax proposals in the Union Budget 2012-2013. Let us keep the background of our Finance Minister Mr. Pronab Mukherjee in mind. He is not a career economist rather his subject which he taught at a not-so-reputed college earlier at the beginning of his political career was political science. But he made it very big across the political map of the country thanks to the unflinching loyalty to the Gandhi family. He never fought any direct elections before his mid-sixties!! As a shrewd politician he earned the confidence of late Indira Gandhi and managed to be elected for Rajya Sabha even from Gujarat. It is clear that he is not a popular leader in the true sense of the term but a weather-beaten Central Minister holding all portfolios in his political career. The latest budget prepared by him has to be seen in this light.
The Economic Survey which was prepared by his ministry preceding his presentation of his Budget clearly signaled that he was in no mood to try out anything bold and it mainly dwelt upon the difficulties that the world and Indian economy has been passing through in the light of poor state of European and American economy. The subtle message for the aam admi in India was to tighten his belt more cruelly for survival. Leaving very little for the common masses to cheer about. Making a few changes here and there does not make it really a visionary budget. Interestingly the reaction from trade and industry bodies has been one of gung-ho! It is nothing but a clever statement on the part of the captains of trade and industry just to be on the good books of the powers that be! Equally interesting were the coverage of this event by various electronic media including all TV channels to turn to experts of all shades mouthing their wordy stuff which may not be that easily decipherable by the common man. It would be perfectly in order to delve into some of Mr. Pranab Mukherjee's budgetary proposals and assess their impact on the common masses in India.
As has already been indicated that the Finance Minister has taken great pains in preparing a sugar-coated pill for the common man in India. Before the pill is bared, let us look at the coat of sugar! Contrary to tremendous popular expectation that the in the matter of personal Income Tax, the Finance Minister has cruelly dashed down the hopes of any relief by raising the threshold beyond two lac which was a small rise from the existing level of one lac eighty thousand rupees. He has chosen to ignore completely the inflation aspect and talked expansively on this so-called largesse on the part of him! Then when did you find a politician waiting for a pat for his or her back from you - when he or she loved to do it himself or herself? A Finance Minister who has been groping in the dark in search of black money can hardly be expected to look beyond the pockets of middle and lower income groups to fund state exchequer!
He has tinkered with the provisions of Section 80D in regard to deduction towards insurance premium on health insurance which is currently available up to Rs15000 annually for self,spuse and dependent children. Health check-up cost up to Rs 5000 has lumped under the existing ceiling Rs.15000. So kind of him!! An apparently beneficial provision named under the late prime minister Rajiv Gandhi - his perpetual loyalty to this family might have been the inspiration! This scheme would be known as 'Rajiv Gandhi Equity Saving Scheme' and under it an investor with a taxable income below 10 lacs would be entitled to a deduction up to Rs.50000 for investment in direct equity but the same would have lock-in period of 3 years which means one has to stay invested for three long years. Just think of his ingenuity! And it is available only for new investors. What has prompted the Finance Minister to devise such an intricate scheme is not clear - may be a futile attempt to bring buoyancy in the stock market which going by the reactions of it - has not been much of a success.
Another much claimed bonanza that the Finance Minister has been supposed to have offered in relief in the form of tax exemption on savings bank interest up to Rs 10000. Here again he displays his firm belief that he can outsmart one and all- may be for a few days! It is clear enough that to get full benefits of this curious provision one has to keep around 2 lac rupees in his or her savings account to be entitled to its full benefit. Is it worth for any sensible investor to even think of parking funds of this amount in savings account?
Now have a taste of the pill from this 'economic doctor'! The cut in the interest rate for the Employees' Provident Fund was effected a day before the budget from 9.5% to 8.25% and in his budget the Finance Minister has delivered another blow by proposing to make changes in Section 80C by lowering the ceiling to 10% of the premia of the sum assured from 20% for tax exemption under 80C and 10(10D) of the Income Tax Act. One lethal blow to rising middle-class!
Similarly he has proposed to tax property transactions by making tax deduction at source mandatory for properties being sold for sums in excess of 50 lacs at the rate of 1%. No registration can take place without proof of such deduction. Thus you are taxed before your actual tax liability!
Perhaps the harshest feature of his budget comes from the mindless steep increase in the rate of Service Tax from 10% to 12%. He has brought the entire class of common people before the firing squad. It is an indirect tax which would be collected indiscriminately form the rich as well as the poor at the same rate. And what about its net effects? While the rich would directly pass it on to the poor and the poor who are already groaning under the weight of their existing share of it!!
The Finance Minister has not only juggled with figures to cast a spell - albeit temporary but did so with words too. He has quoted Shakespeare ' must be cruel to be kind'!! Now it is for the intelligent readers to judge if he has been kind at all. History would judge him not so kindly!
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